HuffPo buy underscores digital news value

DavidB. Wilkerson

CHICAGO (MarketWatch) — However the transaction works out for AOL Inc., its acquisition of Huffington Post says a lot about the value of news, opinion-based and otherwise, in the rapidly growing digital-advertising business, experts said Monday.

AOL
AOL
said Monday that it has signed a definitive agreement to buy Huffington Post for $315 million.

The announcement comes after last November’s somewhat similar word that Newsweek had merged in a 50-50 joint venture with the news site Daily Beast. In that agreement, Tina Brown — noted editor of the New Yorker and Vanity Fair before founding the Daily Beast — was named editor in chief of the combined entity, much as Arianna Huffington will take charge of all AOL content.

AOL to acquire the Huffington Post

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Emily Steel reports on AOL's $315 million acquisition of the liberal-leaning news site.

“We’re seeing a maturation of digital news,” said Ken Doctor, a digital analyst at Outsell Inc. “While newspapers think they can recoup some subscription money this year through pay walls, most of the money in the digital medium is in advertising. Right now, digital advertising is No. 3 behind newspapers and broadcasters, but it’s the fastest growing by far, and it’s going to surpass newspapers and broadcast within the next two years. So that’s where the money is.

“What’s important about news,” Doctor continued, “is that it has the currency to bring readers back every day, especially news junkies, and with that daily readership you get the most data about that audience so you can do targeted advertising. And digital advertising is the most targetable of all media.”

Huffington Post has 25 million users a month, which gives AOL a substantive new offering for advertisers. “They’re definitely getting scale,” said Laura Martin, analyst at Needham & Co. “When you’re starting something, there’s always a question of build vs. buy. Building takes time, and time is a key value driver in the Internet world. This allows them to target instantly advertisers they couldn’t have [otherwise].”

AOL’s sites, including such brands as TechCrunch and Patch, will now have about 117 million combined unique users.

Further, the Huffington Post, with its unabashed liberal perspective, demonstrates what seems to be one of the guiding principles of digital news. “[This deal] confirms the idea that opinion journalism is what works best on the Web. It’s really about the sort of echo chamber we’ve been talking about for years,” said Stephanie Sandberg, chief marketing officer of SSA & Co. and former president of the New Republic. “There’s a whole generation of people who have gravitated toward opinions that reflect their own, but are a little more informed. If you have a take on topic A, and read something that has the same point of view but backs it with more facts, then you get a little smarter about it, and it’s more fun.”

AOL has needed an identity badly, and Huffington Post is a step in that direction, according to Outsell’s Doctor. “On the Egypt story, for instance, nobody’s saying, ‘Well, I wonder what AOL has to say about what’s going on in Egypt.’ There aren’t a lot of highly recognizable faces in digital news, and Arianna’s is one of them. So now Armstrong has not only gained an audience he thinks he can monetize better than Huffington Post can, but he’s put a face to what has been a faceless portal.”

Doctor wonders if Yahoo Inc.
YHOO, +0.85%
will try to do something similar. “Yahoo has the same problem. It’s faceless. Maybe a site like Politico would be a fit there.”

Politico, a chronicle of Beltway movers and shakers that launched in 2007, is owned by Robert Allbritton, chairman of the TV-station group Allbritton Communications.

Along with Newsweek, other publishers with traditional print-based identities are taking bold steps in the digital realm. Last week, News Corp.
NWSA, +1.09%NWS, +1.64%
(NWS) unveiled the Daily, an iPad-only news publication that can be downloaded for 99 cents a week. (News Corp. is the parent company of MarketWatch, the publisher of this report.) Also, in the coming weeks, the online version of the New York Times
NYT, +1.08%
will go behind a metered pay wall.

Sandberg wonders if one unintended consequence of these moves and AOL’s decision to double down on free content will lead to a stark divide between different kinds of readers.

“There are high-end, exhaustive investigative stories that have to be paid for somehow. People will be willing to pay for that, but that’s a diminishing group of individuals,” Sandberg explained. “So there might be a kind of cultural bifurcation between the people who really value getting their news from a trusted source that does its best to go out and do objective reporting … and people who trust something because they agree with the slant. I think that part of it is going to be interesting.”

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